GM pitches ‘Net partnership to dealers

Jim Suhr

Monday, Feb. 5, 2001 | 10:18 a.m.

A top General Motors Corp. executive opened a national auto dealers convention in Las Vegas over the weekend by broadly telling the throng that the Internet's potential in selling vehicles can't be ignored.

A day after that sales pitch by Rick Wagoner, GM's president and chief executive, the world's largest automaker argued its case Sunday directly to its own dealers in hopes the two would join forces in cyberspace.

Seeking to bolster online sales, GM planned to privately detail for its dealers gathered for the National Automobile Dealers Association its concept that both sides partner in a would-be venture called AutoCentric JV LLC.

"If the idea has broad dealer support, we'll proceed. If it doesn't, we won't, Michael Grimaldi, GM's vice president and general manager of field sales, service and parts, said in an AutoCentric-touting videotape recently sent to GM dealers.

GM spelled out the plan in a filing Friday with the U.S. Securities and Exchange Commission, saying it would offer to sell $25 million in AutoCentric shares to those GM dealers who participate, then keep an identical amount in shares to itself.

Revenue from the sales could be used to buy into an existing Internet company or launch a new one, either one meant to offer all makes and models of vehicles, not simply GM's.

"Our objective is to define a new online business model to provide an enhanced online experience for GM customers in order to increase sales of GM vehicles," the filing said.

GM said the SEC filing was legally required to let the company discuss the matter deeper with any of its 7,800 GM dealers attending the Las Vegas convention.

GM has declined to publicly talk specifics about AutoCentric, saying by law the SEC filing for now must speak for itself.

The automaker said the AutoCentric plan, if pursued, would complement its BuyPower.com Web site, which lets customers check available vehicle inventories in their area and get a guaranteed "e-price" based on sales in their market.

While AutoCentric would offer up vehicles by GM's rivals, corporate charity is not driving GM and its dealers into the business of referring Internet car shoppers to dealers. Rather, they are seeking to continue grabbing the attention -- and perhaps some income -- from Web shoppers.

A small fleet of companies offer information on all makes of vehicles and referrals to dealerships. They include Microsoft Corp.'s Carpoint, Autobytel.com Inc., Autoweb.com Inc. and Edmunds.com.

Studies have shown that a majority of shoppers for new vehicles use the Internet to research automobiles. By 2006, according to Forrester Research estimates, more than 6 percent of total new vehicle sales will be made online, compared with less than 1 percent now.

GM said AutoCentric helps better put the company "where consumers like to shop," citing research showing that consumers prefer independent Web sites 3-to-1 over a manufacturer's own auto-peddling site.

"If General Motors is able to address the needs of consumers better than anyone else, it believes the sales will follow," GM's filing said.

Independent Web-based, vehicle-selling sites have undergone a shakeout, broadly attributed to flawed business models and aggressive state franchise laws barring automakers from selling vehicles to anyone but a franchised dealer.

"We'll do much better if we spend our time developing the innovation we need to deliver this kind of service, rather than wasting our time arguing among ourselves about which Internet model will win out," he said.

"The fact is, we don't have to predict which model will prevail. We just have to be ready when individual customers make their own calls," he added.

Bids by automakers to sell their cars online have unnerved dealers.

A J.D. Power and Associates report in December said a survey of more than 3,300 dealers found their satisfaction with automakers the lowest since 1989. More than half of those surveyed said automakers wanted to put them out of business by selling vehicles directly via the Internet.

In the SEC filing, GM's Grimaldi told dealers that AutoCentric "is not a way for General Motors to sell cars direct to consumers."

"Instead, it's a way for us to support you and build our online future together," he said. With AutoCentric, "you control the inventory, you control which vehicles you put online and which vehicles bear prices. Ultimately, you control your online business."